The Office of the Superintendent of Financial Institutions (OSFI) has issued a final version of Guideline B-5: Asset Securitization (the Guideline), which sets out OSFI’s general expectations for asset securitization transactions undertaken by federally regulated insurance companies. The existing guideline on asset securitization was first published in November 2004, and does not adequately account for the effect of certain events that have impacted the financial services landscape, such as the 2008 global financial crisis, neither does it account for certain significant updates that have been made to the Basel securitization framework since that time. That version will be repealed once the Guideline is in effect.
The Guideline features the following:
- it incorporates certain operational and qualitative requirements issued by the Basel Committee on Banking Supervision since the commencement of Basel III;
- it updates the capital treatment that should apply to insurers that invest in and sponsor securitizations;
- it gives some examples of an insurer’s credit risk exposures and of the many functions of an insurer in a securitization transaction; and
- it addresses several notable topics and key requirements relating to asset securitization.
The final version of the Guideline will be effective on January 1, 2019.
Thanks to Brandon Burke, articling student, for his contribution to this article.